Question 1 – worth 32 marks Holly Gordon has retired and derives her income from a series of…

Question 1 – worth 32 marks Holly Gordon has retired and derives her income from a series of…

Question 1 – worth 32 marks

Holly Gordon has retired and derives her income from a series of investments and a part time job at the local cafe. Her income and expenses for the year include:

Income $

Superannuation pension 15,000

Wages from Café (tax withheld $2,367) 22,000

Tips received from the Café from customers

(but she did not wish to declare them as income) 1,500

Laundry Allowance from Café 450

Reimbursement for use of her own motor vehicle

For work purposes 750

Compensation payment 60,000

Holly had been injured work. She finally received settlement for her claim. The $60,000 represented $12,000 in lost wages from the 2017/2018 year. $5,000 represented medical expenses and the remainder was for pain and suffering and damage to her left wrist

Bank interest 2,000

Dividend fully franked 10,000

This dividend carried franking credits of $4,286

Partial 75% franked dividend 5,000

This dividend carried franking credits of $1,607

Rent 10,000

Bequest from friends estate 7,500


· Mortgage repayments 7,000
Thirty per cent of the interest expense relates to her share investments and 70% to the rental property. Interest of $500 was payable on the 1st of each month and Holly always paid on time until 1 June 2018. On the 1 June 2018 Holly pre-paid the interest on her loan for a period of 15 months. She felt this was the most effective way of investing the $7,500 legacy she had just received as a result of a bequest from the will of her friend Brett Taylor. The amount of interest pre-paid equalled the amount of the legacy. 7,500

· Replaced the entire fence surrounding the rental property. It had been in poor condition when the property was acquired last year. 3,000

· Repainted the front wall of the house that had been spray painted by vandals the previous month. 500

· Drycleaning and laundry of uniform for Café 250

· Motor Vehicle deductions 350

· Donation to World Vision Charity 1000

· Purchase of calendar from Red Cross Charity 25

· Tax Agents Fee to prepare 2018 tax return 450

Additional Information

The 10-year loan was taken out on 20th May 2017 when Holly incurred the following costs relating to the loan:

· Valuation fees 800

These were higher than normal as the bank had to use Holly's own residence as well as the rental property for security;

· application fees 600

· stamp duty to register the mortgage 700

Holly also received $1,500 rent that had been outstanding since the previous year (this is in addition to the $10000 she received above)


Calculate Holly's taxable income and net tax payable including Medicare Levy

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